Rates drop a wrong signal

ALAN GREENSPAN had been widely tipped to keep US interest rates on hold, despite concerns that the world’s biggest economy was heading for a “double-dip” recession.

Economists feared that to move rates down would send the wrong signal to the market, and suggest panic at the highest levels in the US.

Ulster Investment Bank Markets chief economist Niall Dunne said that was the key reason supporting non-action by the Fed yesterday.

However, the decision to hold rates would probably undermine markets going forward and further losses were expected.

Most analysts expect the US to avoid a “double-dip” recession, according to a survey by the National Association of Business Economists in the US.

“Despite a recent string of weak economic data, declining stock prices and ongoing revelations of corporate scandal, a double-dip recession is unlikely this year,” the survey said.

That optimism was rejected as vested interests in the US talking up their own book. They have been trying this for the past 18 months without success, said Mr Dunne, who believed the US economy and its stockmarkets were under severe pressure.

Concern must be mounting also that only 112 of the 830 senior executives in the US have signed off on their results for last year.

On the currency markets, the euro had climbed to 98c to the dollar by late afternoon in anticipation of no change on rates from the Fed. It has traded as low as 96.9c.